M/s Pentavox India Pvt. Ltd., Ludhiana V. ACIT, Ludhiana

ITA 5/CHANDI/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9215 (ITAT-CHANDIGARH)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 13-07-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 04-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Validity of assessment
• Section: 68

Judgement Text

INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5 /CHD/20 16 ASSESSMENT YEAR: 2010 - 11 M/S. PENTAVOX INDIA PVT. LTD., 479, SANGAT ROAD, CIVIL LINES, LUDHIANA VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE - 7, LUDHIANA (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SUDHIR SEHGAL, AR REVENUE BY: SH. MANJIT SINGH, DR DATE OF HEARING 01 /0 8 /2016 DATE OF PRONOUNCEMENT 05 /0 8 /2016 O R D E R PER PRASHANT MAHARISHI , A . M . 1 . THIS IS AN APPEAL FILED BY THE A SSESSEE AGAINST THE ORDER OF THE LD CIT(A) - 3, LUDHIANA, DATED 29.10.2015 FOR THE ASSESSMENT YEAR 2010 - 11 CONFIRMING THE PENALTY OF RS. 288000/ - U/S 271(1)(C) OF THE INCOME TAX ACT. 2 . THE BRIEF FACTS OF THE CASE ARE THAT THE A SSESSEE IS A PRIVATE LTD COMPANY WHO FILED ITS RETURN OF INCOME ON 14.10.2010 SHOWING NIL INCOME. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS FOUND THAT THE A SSESSEE HAS OBTAINED LOAN FROM FOUR PERSONS FOR WHICH THE A SSESSEE COULD NOT EXPLAIN SOURCE OF DEPOSITING CASH IN PAGE 2 OF 6 PENATVOX INDIA P LIMITED V ACIT LUDHIANA ITA NO 5/CHD/2016 A Y 2010 - 11 THE BANK ACCOUNT OF THOSE CREDITORS BEFORE THE CHEQUE WERE ISSUED TO IT AND THEREFORE THE LD AO MADE AN ADDITION OF RS. 960000/ - TO THE TOTAL INCOME OF THE ASSESSEE UNDER SECTION 68 OF THE ACT . AS PER THE RETURN OF INCOME FILED THE LOSS CLAIM BY THE ASSESSEE WAS RS. 10345938/ - AND LOSS DETERMINE D BY THE AO AFTER THE ABOVE ADDITION WAS RS. 9385938/ - . A S THERE IS ONLY REDUCTION IN THE LOSS THE A SSESSEE DID NOT PREFER ANY APPEAL AGAINST THE ABOVE ASSE SSMENT ORDER WHEREIN THE ADDITION U/S 68 OF RS. 960000/ - WAS MADE. THEREFORE LD AO ISSUED SHOW CAUSE NOTICE TO THE A SSESSEE FOR PENALTY U/S 271(1 ) ( C). ASSESSEE FILED ITS REPLY DATED 15.03.2015 WHICH IS REPRODUCED AT PAGE 3 OF THE PENALTY ORDER AND AFTER C ONSIDERING THAT LD AO LEVIED PENALTY OF RS. 288000/ - UNDER SECTION 271(1) (C) OF THE ACT. THE ABOVE PENALTY WAS CONTESTED BEFORE THE LD CIT( A ) WHO IN TURN UPHELD THE SAME VIDE PARA 5.1 TO 5.4 OF HIS ORDER DATED 29.10.2015 AS UNDER: - 5.1 I HAVE CAREFULLY CONSIDERED THE APPELLANT'S SUBMISSIONS AND FACTS OF THE CASE ON RECORD. LD. COUNSEL OF THE APPELLANT HAS VALIDLY ARGUED THAT VALIDITY OF ASSESSMENT OR ANY ADDITION MADE IN ASSESSMENT CAN BE ARGUED DURING THE PENALTY PROCEEDINGS. ST HAS BEEN ARGUED THAT APP ELLANT HAS DISCHARGED HIS ONUS OF PROVING IDENTITY OF THE CREDITOR, THEIR CREDIT WORTHINESS AND GENUINENESS AND THESE WAS NO SCOPE FOR ADDITION. LD. COUNSEL ALSO CITED VARIOUS CASE LAWS A S ABOVE IN SUPPORT OF HIS CONTENTION THAT IF THE CREDITORS CANNOT EXP LAIN THE SOURCE OF THEIR FUNDS, THEN THE ASSESSING OFFICER HAS TO PROCEED AGAINST THE CREDITORS AND CANNOT BURDEN THE ASSESSEE. PAGE 3 OF 6 PENATVOX INDIA P LIMITED V ACIT LUDHIANA ITA NO 5/CHD/2016 A Y 2010 - 11 5.2 IT IS OBSERVED THAT THE APPELLANT HAS BEEN ABLE TO ESTABLISH IDENTIFY OF THE CREDITORS, ALL THE CREDITORS ARE DIRECTORS OF T HE APPELLANT COMPANY. HOWEVER, THE CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS ARE IN DOUBT AS IN ALL THE CASES, THESE ARE CASH DEPOSITS IN BANK BEFORE ISSUE OF CHEQUE FOR ADVANCING CREDIT TO THE APPELLANT COMPANY, WHICH IS A PRIVATE LIMITED CONC ERN. DURING PENALTY PROCEEDINGS AND APPEAL PROCEEDINGS, THE APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY EVIDENCE TO ESTABLISH THE CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS. 5.3 SECTION 271(1)(C) OF THE ACT, PROVIDES FOR IMPOSITION OF PENALTY IN CASE THE ASSESSING OFFICER, IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT, IS SATISFIED THAT ANY PERSON HAD CONCEALED PARTICULARS OF HIS INCOME OR HAS FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. EXPLANATION 1 TO CLAUSE (C) SUBSECTION (1) OF SECTION 2 71 PROVIDES THAT WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON, SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND TO BE FALSE OR HE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE AND THAT I LATHE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME, HAVE BEEN DISCLOSED BY HIM , THEN THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF, SHALL FOR THE PURPOSES OF CLAUSE (C) BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 5.4 THE ARGUMENT OF THE LD, COUNSEL THAT THE DEPARTMENT HAS NOT BEEN ABLE TO ESTABLISH THAT MON EY CAME FROM THE COFFERS OF THE APPELLANT COMPANY IS BASELESS. THE APPELLANT HAS NOT CONTESTED THE FINDING OF FACT BY THE ASSESSING OFFICER IN PARA. 3.3 OF THE ASSESSMENT ORDER THAT PAGE 4 OF 6 PENATVOX INDIA P LIMITED V ACIT LUDHIANA ITA NO 5/CHD/2016 A Y 2010 - 11 THE ASSESSES ONLY HAS ROUTED ITS OWN MONEY THROUGH THE BANK ACCOUNTS OF TH E DIRECTORS OF THE COMPANY. FURTHER, APPELLANT HAS NOT BEEN ABLE TO SUBSTANTIATE HIS CLAIM REGARDING CREDIT WORTHINESS AND GENUINENESS OF THE TRANSACTIONS. THE APPELLANT HAS FAILED TO ESTABLISH HOW THE CITED CASE LAWS WERE APPLICABLE ON THE FACTS OF ITS CA SE. THEREFORE THE APPEAL REGARDING LEVY OF PENALTY U/S 271(1)(C) IS REJECTED. 3 . AGAINST THIS THE A SSESSEE HAS PREFERRED THIS APPEAL. 4 . THE LD AR SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A SSESSEE HAS SUBMITTED THE NAMES, ADDRESS, CONFIR MATION, INCOME TAX RETURNS AND THE BANK STATEMENT OF THE LENDERS . ALL THE DEPOSITORS ARE ASSESSED TO INCOME TAX. THEY ARE ALSO THE DIRECTORS AS WELL AS THE SHARE HOLDERS OF THE COMPANY. THE COMPUTATION OF THE TOTAL INCOME OF ALL THE DEPOSITORS WAS ALSO FILED. THEREFORE EVEN ADDITION SHOULD NOT HAVE BEEN MADE IN CASE OF THE A SSESSEE AS THE A SSESSEE HAS DISCHARGE D ITS ONUS OF THE ABOVE CREDITS AND AMPLY ESTABLISHED IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS AND LENDERS. THE A SSE SSEE DID NOT FILE AN APPEAL AT HIGHER FORUMS AGAINST THE ADDITION FOR THE REASONS THAT THE A SSESSEE HAS CARRIED FORWARD LOSSES AND DID NOT HAVE ANY TAX IMPACT. EVEN OTHERWISE NON FILING OF THE APPEAL AGAINST THE ADDITION CANNOT AUTOMATICALLY LEAD TO THE PE NALTY U/S 271(1)(C) OF THE ACT. HE FURTHER SUBMITTED THAT MERELY BECAUSE SOME OF THE CREDITORS HAVE DEPOSIT ED CASH IN THEIR BANK ACCOUNT CANNOT LEAD TO ADDITION INTO THE HANDS OF THE A SSESSEE PAGE 5 OF 6 PENATVOX INDIA P LIMITED V ACIT LUDHIANA ITA NO 5/CHD/2016 A Y 2010 - 11 AS THEY ARE INDEPENDENT LY ASSESSED TO INCOME TAX AND THEIR C OMPLETE DETAILS ARE FILED BEFORE OF THE AO, T HEREFORE THE ABOVE ADDITION CANNOT RESULT INTO IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT . HE RELIED UPON SEVERAL CASE LAWS FILED IN THE PAPER BOOK TO SUPPORT HIS CONTENTIONS. 5 . THE LD DR RELIED UPON THE ORDE RS OF THE LOWER AUTHORITIES REGARDING THE ADDITION AS WELL AS THE PENALTY AND VEHEMENTLY SUBMITTED THAT CIT (A) HAS RIGHTLY UPHELD THE PENALTY. 6 . WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. IN THE PRESENT CASE THE A SSESSEE HAS DISCHARGED ITS ONUS BY PROVIDING THE CONFIRMATION, COPY OF BANK STATEMENT, COPY OF INCOME TAX RETURN ALONG WITH COMPUTATION OF TOTAL INCOME OF THE LENDERS . AS THE DEPOSITORS ARE SEPARATELY ASSESSED TO INCOME TAX, WHEREVER THEY HAVE DEPOSIT ED CASH , IT IS ABSOLUTELY THEIR CO NCERN AND REVENUE MAY SEEK SUCH EXPLANATION FROM TH EM BUT THE A SSESSEE CANNOT BE ASK ED TO PROVE THE SOURCE OF CASH DEPOSIT OF CREDITORS. MERELY BECAUSE THE ASSESSEE COULD NOT EXPLAIN ABOUT THE DEPOSITS IN THE BANK ACCOUNT OF THOSE PERSONS , IT CANNOT LE AD TO IMPOSITION OF PENALTY U/S 271(1)(C) OF THE ACT ON ASSESSEE . FURTHER THE LD. ASSESSING OFFICER HAS NOT LED TO ANY MATERIAL WHICH EVEN REMOTELY SUGGESTS THAT ASSESSEE COMPANY HAS ROUTED ITS OWN MONEY THROUGH THESE LOANS, THEREFORE IT REMAINS AN U NSUBSTANTIATED ALLEGATION AGAINST THE ASSESSEE. FURTHER M ERELY BECAUSE PAGE 6 OF 6 PENATVOX INDIA P LIMITED V ACIT LUDHIANA ITA NO 5/CHD/2016 A Y 2010 - 11 THE APPEAL HAS NOT BEEN FILED IS ALSO NOT A REASON FOR LEVYING PENALTY. FURTHER DECISIONS RELIED UP ON BY THE APPELLANT BEFORE US ALSO SUPPORTS THE VIEW THAT IN THE FACTS AND CIRCUMSTANCES OF THIS CASE PENALTY UNDER SECTION 271(1) (C) CANNOT BE SUSTAINED. IN VIEW OF ABOVE FACTS AND ON THE BASIS OF DETAILS SUBMITTED BY THE A SSESSEE IN THE PAPER BOOK WHEREIN HE HAS DISCHARGED HIS ONUS OF PROVING THE CA SH CREDIT, WE ARE OF THE OPINION THAT PENALTY U/S 271(1)(C) ON THE ABOVE ADDITION OF RS. 960000/ - CANNOT BE SUSTAINED. THEREFORE WE REVERSE THE FINDING OF THE LD CIT(A) IN CONFIRMING THE PENALTY OF RS. 288000/ - U/S 271(1)(C) OF THE ACT AND DIRECT TO DELETE IT. 7 . IN THE RESULT THE APPEAL OF THE A SSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 5 / 08 /2016 . - S D / - - S D / - ( BHAVNESH SAINI ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 5 / 08 / 2016 A K KEOT COPY FORWARDED TO 1 . APPLICANT 2 . RESPONDENT 3 . CIT 4 . CIT (A) 5 . DR:ITAT ASSISTANT REGISTRAR ITAT, CHANDIGARH